How Influential Are Institutions on Economic behaviour: Case Studies of Meiji Japan (1868-1912) and 17th Century England

DISCLAIMER: This article was taken from an essay I wrote for a university module hence the academic style.

The influence of institutions on economic behaviour is significant as it is crucial in explaining differing economic outcomes throughout history. This is a key debate in economic history, engaging with the new institutionalist economics represented by Douglass North, and applying this approach to historical events. This can help historians understand how the actions of rulers and elites influence the trajectory of history and how the success of societies across different time periods is determined. Moreover, this debate allows an evaluation of the institutional causes of economic outcomes from tangible ‘formal institutions’ (such as legal, political and financial institutions) to uncodified ‘informal institutions’ (such as customs)[1]. These institutional factors in economic behaviour are also contrasted with other external factors such as the role of geographical climates and international contexts in influencing economic outcomes. Therefore, not only is this debate essential in evaluating the role and relevance of institutions in historical economic outcomes, it is also crucial in uncovering how institutional choices can determine these outcomes. However, this is bound by limitations such as the difficulty in isolating institutions and separating them from other factors such as geo-political changes. Moreover, when navigating colonial archives, it is essential not to fall victim to a view of superior ‘Western’ institutional styles and rather to provide a neutral assessment of institutional impacts in different nations. There is also great methodological difficulty in determining the extent to which institutions influence economic behaviour. This is due to lacking data and complex contextual differences making comparisons difficult across countries. However, despite these limitations, in analysing institutional changes across historical case studies, we can evaluate the importance and effectiveness of institutional choices.

I mostly agree that, whilst the physical environment historically determines the potential for economic development, formal institutions are indispensable in structuring incentives for economic behaviour. Formal institutions encourage commercial economic behaviour through stable credit markets, property rights, democratic political institutions and the provision of public goods where necessary. Moreover, securing international relations and free trade can be achieved through institutional military investment. However, whilst informal institutions are often crucial in economic conduct, they ultimately lack enforcement and only take precedence in the absence of strong formal institutions.

I have chosen the case study of 17^th-century England: a turbulent political period in which the institutions of parliament and the Crown engaged in a vociferous battle and institutional change was central. Institutions evolved rapidly through the English Civil War 1642-51, the restoration under King Charles II and finally the 1688 Glorious Revolution in which the tyranny of James II was replaced by constitutionalism. As North and Weingast demonstrated, this intertwined with a dynamic economic period as the monarchy engaged in expropriation of property and authoritarian practices[2]. Resultingly, there were huge institutional implications for the status of property rights, financial markets, agricultural and commercial practices and trade. Similarly, across the century, as Michael Braddick argued[3], a stable fiscal military state with the capacity to tax with great bureaucratic efficiency emerged.

Moreover, I selected the period of Meiji Japan (1868-1912) as a case study of imperial restoration, following the Tokugawa Shogunate, with a constitutional monarchy and a growing fiscal-military capacity, represented by the successes of the Sino-Japanese and Russo-Japanese wars. This also exemplifies a period of immense institutional upheaval with the feudal Daimyo system upturned to facilitate industrialisation with ‘elite redeployment’ as Makio Yamada argued[4]. Moreover, there are myriad common institutional themes between the case studies. For example, both encountered overhauled financial systems, the growth of trade, solidification of property rights, international military influence and the persistence of political authoritarianism among democratic reforms. This ensures that both case studies are rife with heavy institutional change to inform my analysis and are also comparable. However, the more modern industrialised context of Meiji Japan with greater social development and property right allocations in agriculture requires a contextualised comparison. Furthermore, I was motivated by a desire to rebut the Eurocentric idea that fringe countries, such as Japan, were backwards institutionally. Additionally, this level of global diversity, spanning different periods and areas, will enhance the robustness of my analysis.

Financial institutions can influence economic behaviour as demonstrated by the stabilisation of the currency and credit market in both the case studies of Meiji Japan and 17^th Century England. As Janet Hunter argued, the 1882 Bank of Japan centralised control of circulating the Yen with the disappearance of national banks by 1900[5]. This addressed an inflationary drive by a multitude of banks to issue currencies which had required government subsidies to prevent defaulting, with the Yen failing to establish itself initially after its introduction in 1872[6]. However, despite an initially inflationary and erroneous beginning, Japanese centralised banking stabilised the currency and resultingly fortified the credit market with lower interest rates. The currency evolved with reminting in silver and eventually to the Gold Standard in 1897, achieved following the reparations owed to Japan in the 1894-5 Sino-Japanese War victory. As Nathan Sussman and Yishay Yafeh argued, the declining risk premium on Japanese government bonds correlated with the long-term uptick in investment following the banking overhaul, 1897 Gold Standard and Meiji Constitution[7]. Whilst this suggests the role of financial institutions in encouraging foreign investment, geo-political events were also strongly correlative in trust in the currency and stability of the Japanese financial system. This was exemplified by correlations between Japanese military victories and alliances with foreign investment. However, as discussed later, the strength of military institutions allows countries to navigate the uncertainty of international relations. Whilst Sussman and Yafeh maintain scepticism that the Gold Standard is not strongly correlative with foreign investment, Hunter convincingly suggests the symbolic importance of the gold standard in bringing Japan in line with Western financial standards[8]. This symbolism is crucial in inspiring trust and confidence in foreign investors. However, the gold standard was merely a thread in the programme of financial overhaul in Meiji Japan. Institutionally, the development of a stable credit market through central and commercial banking was more conducive to growth.

Moreover, alongside stabilising the currency and establishing central banking, financial institutions such as government-led special banks and commercial banks also emerged to stimulate trade and investment. Notably, the 1880 Yokohama Specie Bank subsidised trade whilst there was lending from the Hypothec Bank and Industrial Bank of Japan to industrial and agricultural sectors[9]. This demonstrates that Meiji Japan was often characterised by state-directed institutional change. However, the development of commercial banking, often driven by family-owned Zaibatsu businesses, also facilitated enterprise[10]. Furthermore, as Makio Yamada argued the resources of the Daimyo and Samurai were redeployed to finance the financial system. However, whilst government and private financial institutions were conducive to development, the role of private wealth and personal entrepreneurial partnerships still overwhelmed by banking with 77% of funds originating privately in an 1897 industrial survey[11]. This suggests that the field of banking was limited in stimulating investment. However, the collective financial institutional changes of currency stabilisation and centralised banking ensured economic modernisation in Meiji Japan.

Similarly, following the Glorious Revolution, financial institutions were developed in 17th-century England to encourage investment, stabilise the market and even prevent malpractices by the state in light of vicious expropriation. Notably, in 1694, the Bank of England was created and government borrowing capacity soared from £1 million to £17 million during the 9 Years War (a staggering 40% of GNI) as institutional changes reduced the risk of default as North and Weingast argued[12].  Moreover, the added financial institution of the 1698 Sinking Fund insured against potential shortfalls in tax revenue preventing loan repayments. Whilst financial changes facilitated borrowing capacity[13], this changed financial system facilitated Braddick’s concept of the fiscal-military state[14], with parliamentary sovereignty and judicial independence increasing state efficiency of tax collection. Moreover, the financial changes towards the end of the 17^th Century induced the growth of commercial banking and capital markets, which similarly benefitted in Meiji Japan following the centralisation of banking. Notably, the growth of financial instruments (with the development of paper money), increased liquidity with lower interest rates and higher borrowing[15]. This also increased security trading with the annual volume multiplying from £300,000 to £11,000,000 in the 20 years after 1690 and even incentives for credible savings all incentivised investment[16]. As Sussman explores, the Corporation in London during the 17^th Century acted as a private independent institution in market stabilisation mediating between and directly with the Crown[17]. This triggered the creation of financial instruments such as bonds and notes with a secondary market allowing increased borrowing with interest rates halving from 8% in the 55 years following 1625[18]. Although it was restored in 1688 following the Glorious Revolution and played a more constant role than the Bank of England in the 17^th century, the insolvency of The Corporation in 1683 reflects the lack of institutional security compared to the Bank of England. As Sussman declares, borrowing was built on weaker foundations of collateral often based on reputation[19] whereas the Bank of England, emerging from a statute, was more institutionally grounded and even held the Crown to account. Contrastingly, Meiji Japan established more modernised financial institutions with greater state control. However, across both case studies, we see the importance of credible financial institutions in stabilising the currency and the development of a credit market for economic growth.

Moreover, political institutions which vary in their levels of democracy, support for reform and centralisation can also influence economic behaviour. Notably, in Meiji Japan there was a state transition towards a more ‘westernised’ approach, which produced a combination of elite preference and top-down government with social development and decentralisation. On the one hand, as Yamada argued, the redeployment programme saw the Samurai class of the Daimyo system abolished which eroded hereditary privileges and decentralised political power, leading to economic repercussions[20]. To consciously modernise Japan, elites were repurposed into productive bureaucratic institutions, with elite employment in 80% of public sector jobs such as education[21]. However, many Daimyos were integrated into central peerage and allocated generous government bond pensions[22]. Therefore, there was still preference for elites institutionally with Samurai dominance through commercial loans and state employment following revolution. This suggests that top-down political institutions often ensure that an economic elite class consistently benefit, juxtaposing with more democratic countries. Nevertheless, as Yamada discusses, despite the lack of political participation, this was not just a state-led process and arguably the traditional elites were driven away by many of the provincial lower-class Samurai[23]. This indicates a degree of political and economic decentralisation. They had also exacted reform on a local level before the revolution and usurped traditional elites such as the Samurai and high-ranking Daimyo lords[24]. However, despite initial provincial involvement and regional decentralisation, Japan’s 47 prefectures centralised political control through increased tax collection[25] . Although national Meiji governments instituted changes with the 1871 replacement of Daimyos for centrally appointed governors and 1876 denial of Samurai status[26], ultimately these stemmed from local political elites who became integrated into the state level following the Meiji restoration. However, there was a fundamental shift in the hierarchy of the economy. Moreover, through social development, these changes recalibrated economic power through greater opportunity. Notably, with investment into education there was a 95% education rate by 1900[27]. Similarly, there was growth in infrastructure through telegraph and railway connections between the major cities[28]. This suggests that institutions through political decentralisation and social development can affect economic mobility and the concentration of economic power.

 Similarly, institutional political changes in 17th-century England saw an evolution of economic behaviour, no longer so concentrated in the crown. As North and Weingast explored, expropriation and revoking loan commitments was commonplace among the monarchy before the English Civil War and the constitutional changes of the 1688 Glorious Revolution. Following the restoration, the political relationship was also damaged by authoritarianism. This led to aforementioned changes such as securing property rights and curbing royal prerogative powers and financial and judicial influence by the crown with abolition of special courts[29]. As will be discussed later, these institutional changes facilitated commercial changes with increased property rights, trade, financial stability, military-fiscal capabilities and agrarian changes such as specialisation and land organisation. This suggests the importance of political institutions in facilitating economic growth through property rights which were similarly safeguarded in Japan[30]. On the contrary to North and Weingast, Julian Hoppit argued that following the Glorious Revolution, property rights became less secure with parliamentary expropriation increased for hundreds of years following[31]. However, this argument appears unconvincing as expropriation was fully compensated and often performed in public interests as seen with infrastructure projects. Contrastingly, the scope of social development was much weaker in 17^th-century England and often limited to small projects such as turnpikes[32]. This increased Japanese social development reflects the informal institutions of ‘Confucian capitalism’[33] alongside the demands of a more international industrialised economy.

On the other hand, the role of political institutions in centralising economic power is inherent within both case studies. Meiji social reforms such as education and infrastructural investment alongside financial stabilisation and commercialisation provided a degree of economic mobility. However, ultimately authoritarian political institutions favoured an economic hierarchy as evidenced by the contradictions of the 1889 Meiji Constitution. Despite a bicameral parliamentary system, independent judiciary and guaranteed property rights, franchise was restricted to the wealthiest and the emperor’s sovereignty was asserted[34]. Moreover, in the 1890 Meiji election only half a million people voted whilst in 17^th-century England, parliaments were dominated by noblemen[35] and the ‘Whigs’ were disenfranchised in the 1780s prior to the Glorious Revolution[36]. Despite, the reassertion of the monarchy during the restoration with recharted boundaries favouring the crown, King James II alienated his supporters and provoked the Glorious Revolution[37]. Whilst arguably the reduced monarchical influence of England clashes with the sovereignty of the Meiji emperor, both case studies reflect the prevalence of elite preference in authoritarian political institutions despite greater social development in Japan. Although the supremacy of the monarch decreased as Weingast and North explored, the state grew in its implementation of tax measures with increased bureaucracy[38] and fiscal-military capacity[39] . Similarly, in Meiji Japan whilst the state was initially overthrown, it reasserted itself with the distribution of power to a different political elite with the prefecture system, the centralised collection of the 1873 Land Tax and the eradication of the 1877 rebellion[40]. While the economic growth of provinces in Meiji Japan and loss of monarchical influence in England demonstrates a decentralisation of power, political centralisation was key to both periods. However, despite often benefitting the economic elite, both states extended the potential for economic freedom with property rights, financial stabilisation and free trade. Therefore, the case studies exhibit the importance of political institutions in determining economic behaviour. Whilst policy choices can affect commercial changes, authoritarian political institutions are likely to favour centralisation and economic inequality. Therefore, more democratic political institutions pursuing more equitable policies are likely to yield more stable and entrepreneurial behaviour through a meritocratic and competitive economy.

These changes in political and financial institutions across both periods exemplify the role of institutional policies in agricultural and commercial economic growth in Meiji Japan and 17^th century England.  Legal, financial and political institutions were crucial in determining incentives in both countries, facilitating a commercialised economy through policies, commercial codes and financial institutions. Notably, in England property rights were crucial to commercial success. North and Weingast convincingly argued that these were solidified with the 1641 abolition of the Star Chamber which was built upon the royal prerogative powers and circumvented common law[41]. Despite a period of uncertainty during the restoration with the potential for tyranny re-emerging, following the Glorious Revolution and between the period of 1640 to 1660, property rights were largely enforced. Moreover, reduced land restrictions facilitated commercial activity as North and Weingast argued[42]. As Sussman explored, London was also crucial in stimulating investment through The Corporation and opportunities for investment following the 1666 Great Fire of London[43]. This was strengthened by the development of banking solidified by the Bank of England and changes to crown finances following the Glorious Revolution. Government institutions evolved from strict market intervention to facilitate commercialisation with food supply controls abolished after the 1660s[44] and property rights fortified following the 1640s despite breaches during the restoration. This corresponded with greater levels of growth after 1688, with restrictions on crown tyranny allowing the growth of trade, business and financial markets. Similarly, as merchant customs began to become engrained into common law from 1650s[45], incentives were created for the merchant trade market with English yearly trade surplus doubling between the restoration and 1680[46]. Whilst legal, political and financial institutional choices clearly impact commercial growth, geo-political context and resource abundance arguably determine the importance of trade. However, as will be discussed later, whilst geography historically determines the potential for economic development, international relations can be safeguarded through a strong military presence.

Similarly in Meiji Japan, institutions were sources of importance in commercial growth through trade, industrialisation policies and corporate structure. As John Sagers argued, industrialisation initially began as a state-led project through state institutions, importing western commercial practices such as the technology in the Tomioka Silk Filature in 1871 and hiring of foreign advisors to encourage Japanese modernisation[47]. However, this strategy was wasteful with symbolically overinvested technologies unsuitable for Japanese economic context and financial capital[48]. This suggests that institutions that centralise economic behaviour too strongly can negatively impact growth by impeding natural market forces and efficient resource allocation. Whilst the government incentivised these changes through banking, such as Shibusawa Eiichi’s role in the Dai-Ichi Bank and loans through the Hypothec Bank[49], institutions can also impede growth when they intervene too strongly. Notably, in the 1880s the private sector regained control of economic decision-making which sparked the economic take-off with the 1886 to 1889 first enterprise boom that Naofumi Nakamura discusses[50]. On the one hand, arguably corporate structure became too deregulated with the government failure to establish Eiichi’s vision of joint-stock companies to stimulate growth and represent the public interest. The Zaibatsu model which represented conglomerates of many industrial companies, usually with family-owned founders and backed by banks[51], overwhelmed this.  However, privatisation was beneficial as it resulted in a decentralised process of industrial growth across regions following the sale of state enterprises [52]. This shift in decision-making suggests that institutional conditions must facilitate natural market forces in some sectors. This is demonstrated by the growing prosperity at the end of both case studies once a framework for commercial incentives emerged. Therefore, excessive intervention of institutions can impede market growth with the importance of the private sector alongside infrastructural and social development seen in Japan.

However, although a strong private sector is important in economic growth, institutions must safeguard this by encouraging market incentives and political institutions must provide public goods. Notably, public investment into key areas facilitated wider industrialisation as John Tang argued through accessibility and market expansion[53] with railroad and shipping connections[54] between major cities such as Osaka and Tokyo. Despite an initial partnership from the private sector, railways were still state-led and merely securing investment into railway bonds until eventual partial nationalisation in 1906 to 1907 [55]. Moreover, the government promoted compulsory primary education in 1872 to advance human capital and therefore innovation. Alongside public investment, the government also promoted commercialisation through state-led changes in aforementioned financial institutions and legal institutions epitomised by the introduction of the commercial code[56]. Alongside the overhaul of the class system with the redeployment of former aristocratic families in entrepreneurial areas and the new propertied class following the 1871 prefecture system[57], this provided the foundations for commercialisation through private banking, stock-markets with joint-stock companies and investment through the proliferation of the ‘Zaibatsu’ model. Resultingly, these institutional improvements in economic efficiency and growth enabled the growth of trade with exportation of tea and silk in particular[58]. However, trade is also dependent upon geo-political relations although institutional military largely determines this, as will be discussed later. Although, Meiji Japan made greater provisions for encouraging economic mobility with state ownership of public goods, both Japan and England institutionally pushed measures for financial markets and incentivised growth, emphasising the importance of institutional frameworks in market activity.

Moreover, the role of institutions in promoting agricultural growth was demonstrated with property rights, technology and trade opportunities in 17^th-century England. As Ann Kussmaul argued, the proliferation of regional specialisation in agricultural practices reflected the market integration of England with reduced transport costs[59]. This was evidenced by the growth in parliamentary approval for turnpikes after 1663[60]. The growth of trade led to specialisation in comparatively advantageous practices such as grain specialisation in areas closer to London[61]. However, as this period predated enclosure, changes in agriculture were mainly driven by market opportunities rather than productive property allocations. As Dan Bogart and Gary Richardson argued, the lack of innovative agricultural growth was symptomatic of strict settlements with inherited estates preventing efficient resource allocation[62]. Moreover, prior to 18^th-century parliamentary intervention, the complexity of chancery courts led to enforcement issues, suggesting that inadequate contracts and property rights limited incentives for growth[63]. This demonstrates the institutional importance of property rights in encouraging incentives evidenced by the contrasting aforementioned successes in trade and banking in the late 17^th Century as property rights improved, however agricultural property allocations remained inefficient. Therefore, whilst natural climate determines the suitability for agriculture, ultimately institutions determine success.

Conversely, the Meiji period demonstrated major institutional change to the benefit of agriculture. Notably, the 1873 Land Tax reform shifted a tax based on yield percentage to a regressive fixed tax to encourage investment[64]. Resultingly, this tax constituted the most of any revenue source and was vital for government reinvestments into finance, infrastructure and education for example. Moreover, tax collection through money rather than produce consequently increased market engagement and agricultural productivity[65]. Meanwhile, agricultural trade and commercialisation led to specialisations in comparatively advantageous areas such as lower export prices in cotton and wax in the Kansai region[66]. Despite Samurai uprisings against the land tax, fundamental property rights and a free market for land allowed a more efficient allocation of resources and farming[67]. Although there are comparable specialisations and trade networks built through government investment and property right laws between Meiji Japan and 17^th Century England, the more commercialised and productive model of agriculture in Meiji Japan stemmed from a freer market for land and the movement of capital. This suggests that institutions are important to economic behaviour in safeguarding property rights, competition and providing public goods. Moreover, excessive institutional intervention hinders market efficiency as exemplified by expropriation in England and the fast-tracking of incompatible technologies in Japan.

On the other hand, arguably informal institutions, with unofficial guidelines such as cultures and ideas, are more important than traditional formal institutions. This is because they have the potential to influence the emergence of formal institutions whilst also often dictating economic activities in the absence of formal institutionalisation. Notably, as Hunter argued in Meiji Japan there was a pragmatic philosophy encouraging the imitation of western technology with the idea of ‘wakon yōsai’ whilst Samurai conventions such as a deference to hierarchy may have contributed to elite redeployment[68]. Likewise, Sagers argues the moral economy of ‘Confucian capitalism’ is also reflected in institutional changes such as a drive towards education and infrastructure to provide opportunity alongside free-market capitalism[69]. Similarly, in 17^th-century England, merchant customs dictated the rules of trade for the first half of the century[70]. Moreover, 17^th-century religious culture facilitated many institutional changes with Anglican, Catholic and Puritan conflicts central to the English Civil War and restoration. Despite this, fundamentally informal institutions are unenforceable and often outweighed by self-interest. This is reflected by Eiichi’s conflict with commercial changes which departed from the conventions of Confucianism through commodification[71]. Similarly, English commercial trading conventions were not as influential until formalised and whilst merchants were widely in favour of secure property rights, these were frequently derogated reflecting the greater importance of formal institutions.

Arguably the influence of institutions on economic behaviour is undermined by the geo-political environment with international relations influencing economic behaviours. Notably, in Meiji Japan geo-political tensions were strong with a conscious effort to westernise and build national strength through institutional change. As Hunter convincingly argued, Meiji officials were motivated by a desire to promote Japanese military capabilities in the face of western imperialism with the pressures of the ‘unequal treaties’[72]. Similarly, as Sussman and Yafeh argued, military successes and alliances, such as the Sino-Japanese 1894-5 and Russo-Japanese 1904-05 victories and the 1902 Anglo-Japanese treaty, corresponded with a falling risk premium in Japan[73]. This suggests that speculations over geo-political stability strongly impact foreign investment. Moreover, alongside geopolitical tensions motivating economic change, the nature of these changes often reflected the international status quo with the adoption of the gold standard and the aforementioned drive for western technology. This indicates that geo-political pressures are influential in determining institutional choices. However, an institutionally strong economy is resistant to these pressures through successful military organisation and economic self-sufficiency which decreases the capacity for foreign trade pressures. Although arguably international relations can affect economic behaviour, ultimately institutions determine military capability and therefore international relations.

Furthermore, the importance of strong institutions in determining military capacity to navigate international relations was also demonstrated in 17^th-century England. As Braddick argues, England transformed into a fiscal-military state[74]. By the 1630s, the Elizabethan mobilisation of private resources had fallen, resulting in demands for a comprehensive government control of the military[75]. Following the 1640s, state control over the navy coincided with increased bureaucratic tax collection, excise taxes and customs revenues and increased financial liquidity following the Glorious Revolution[76]. This facilitated military strength with the British navy equipped with 216 additional warships in the decade before 1660 and by 1689 England possessed world-leading military strength[77], asserting naval dominance after the deadlock of the 1604 Treaty of London. As Braddick argued, the uncertain context of the Civil War and Cromwellian rule demanded a fortified and centralised military founded on financial innovations which revolutionised England, particularly following the 1660s[78]. This suggests that a centralised and well-invested military is also contingent upon an institutional capacity for tax collection. This level of naval domination supported by fiscal changes facilitated trade by thwarting piracy and safeguarding merchant shipping[79], indicating the role of institutional support for military strength in facilitating commercial economic behaviour. Similarly, in Meiji Japan following a period of uncertainty with imperialism in Asia, universal military conscription was introduced in 1873[80]. After victories over Russia and China, growing military production led to a strong military position by 1914, particularly through improved transport infrastructure, as Tang argued[81]. Therefore, military institutional investment is key to international commerce and stable economic behaviour.

As economic historians have argued, there are cases where natural climates can determine economic behaviours irrespective of institutional choices. Notably, Jared Diamond contended that Eurasian climates were more conducive to food production and agriculture thus affecting the historical development of societies[82] and the ability to be self-sustaining. The role of climate is reflected in the effect of rainfall variations on English agriculture and the regional specialisation[83]. Similarly, in Meiji Japan, railroads were tailored to more accessible areas whilst coal production favoured cities with natural resources and accessibility, depriving the resource-poor and more remote island of Shikoku[84]. Although both case studies are in naturally-beneficial climates, this suggests the role of natural climates in facilitating the origins of commercial behaviour. However, ultimately as demonstrated by the absence of agricultural efficient property laws in 17^th-century England, these advantages can only be exploited by institutional choices. Resultingly, institutions are influential in determining economic behaviour provided there is an adequate physical climate for potential development.

Overall, institutions are heavily influential in economic behaviour through structuring incentives and stabilising the market. Although the physical environment historically determines the potential for economic development, without institutions these physical advantages are untapped. Whilst informal institutions are often crucial in economic conduct, they lack the enforcement of formal institutions in encouraging commercial economic behaviour. This is delivered through stable credit markets, property rights, the rule of law, democratic political institutions, the provision of public goods where necessary and institutional military investment. Whilst Meiji Japan and 17^th-century England both encouraged commercial economic behaviour through the institutions of credit markets, property rights and military defence, both failed to deliver democratic political institutions and England lacked the agricultural incentives and social development of Japan.

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Footnotes

[1] Douglass North, Institutions: Journal of Economic Perspectives (JEP, 1991), 97–112.

[2] Douglass North and Barry Weingast, Constitutions and Commitment: the Evolution of Institutions Governing Public Choice in Seventeenth-Century England, Journal of Economic History (Cambridge, 1989), 803–32.

[3] Michael Braddick, State Formation in Early Modern England, c. 1550–1700 (Cambridge, 2000), 177–286.

[4] Makio, Yamada, Making Reform and Stability Compatible with Each Other: Elite Redeployment in Meiji Japan, Journal of Institutional Economics (Cambridge, 2022), 861–75

[5] Janet Hunter, & C Storz, Institutional and Technological Change in Japan's Economy: Past and Present (London, 2005), 58.

[6] Ibid, 59.

[7] Nathan Sussman and Yishay Yafeh, Institutions, Reforms, and Country Risk: Lessons from Japanese Government Debt in the Meiji Era, The Journal of Economic History (Cambridge, 2000), 457.

[8] Hunter, Institutions, 59.

[9] Ibid, 60.

[10] Ibid, 60.

[11] Ibid, 60.

[12] North and Weingast, Constitutions and Commitment, 823.

[13] Ibid, 805.

[14] Braddick, State, 177–286.

[15] Ibid, 267.

[16] North and Weingast, Constitutions and Commitment, 826.

[17] Nathan Sussman, Financial Developments in London in the Seventeenth Century: The Financial Revolution Revisited, The Journal of Economic History (Cambridge, 2022), 481.

[18] Ibid, 500.

[19] Ibid, 508.

[20] Yamada, Elite Redeployment, 862.

[21] Ibid, 869.

[22] Ibid.

[23] Ibid, 866.

[24] Ibid, 864.

[25] John Tang, Railroad Expansion and Industrialization: Evidence from Meiji Japan, The Journal of Economic History (Cambridge, 2014), 866.

[26] Yamada, Elite Redeployment, 868.

[27] Ibid, 70.

[28] Tang, Railroad, 866.

[29] North and Weingast, Constitutions and Commitment, 814.

[30] Sussman and Yafeh, Institutions, 445.

[31] Julian Hoppit, Compulsion, Compensation and Property Rights in Britain, 1688–1833, (Oxford, 2011), 98.

[32] Ibid, 100.

[33] John Sagers, Confucian Capitalism: Shibusawa Eiichi, Business Ethics, and Economic Development in Meiji Japan, (London, 2018).

[34] Hunter, Institutions, 49.

[35] Richard Grassby, Politics and Government, in The Business Community of Seventeenth-Century England (Cambridge, 1995), 224.

[36] North and Weingast, Constitutions and Commitment, 815.

[37] Ibid.

[38] Grassby, Politics, 214.

[39] Braddick, State, 177–286.

[40] Sagers, Confucian, 55-98.

[41] North and Weingast, Constitutions and Commitment, 814.

[42] Ibid.

[43] Sussman, Corporation, 504.

[44] Grassby, Politics, 214.

[45] Ibid.

[46] Sussman, Corporation, 503.

[47] Sagers, Confucian, 62.

[48] Ibid, 63.

[49] Ibid, 64.

[50] Naofumi Nakamura, Meiji-Era Industrialization and Provincial Vitality: The Significance of the First Enterprise Boom of the 1880s (Oxford, 2000), 187–205.

[51] Hunter, Institutions, 62.

[52] Nakamura, Provinces, 189.

[53] Tang, Railroad, 864.

[54] Hunter, Institutions, 51.

[55] Tang, Railroad, 866.

[56] Hunter, Institutions, 51.

[57] Nakamura, Provinces, 191.

[58] Ibid, 189.

[59] Ann Kussmaul, Agrarian Change in Seventeenth-Century England: The Economic Historian as Paleontologist, The Journal of Economic History (Cambridge, 1985), 1.

[60] Hoppit, Property, 100.

[61] Kussmaul, Agrarianism, 20.

[62] Dan Bogart and Gary Richardson, Making Property Productive: Reorganizing Rights to Real and Equitable Estates in Britain, 1660 to 1830 (California, 2008), 9.

[63] Ibid, 11.

[64] Sagers, Confucian, 55.

[65] Ibid, 55-56.

[66] Ibid, 26.

[67] Yamada, Redeployment, 871.

[68] Hunter, Institutions, 79.

[69] Sagers, Confucian, 9.

[70] Grassby, Politics, 214.

[71] Sagers, Confucian, 58.

[72] Hunter, Institutions, 51.

[73] Sussman and Yafeh, Institutions, 457.

[74] Braddick, State, 177–286.

[75] Ibid, 203.

[76] Ibid, 254-266.

[77] Ibid, 218.

[78] Ibid, 278.

[79] Ibid, 212-223.

[80] Hunter, Institutions, 49.

[81] Tang, Railroad, 875.

[82]  Jared Diamond, Guns, Germs and Steel, (New York 1997) Ch.4. 

[83] Kussmaul, Agrarianism, 15.

[84] Tang, Railroad, 869.